Government Urged To Go Slow On Domestic Debts

Kenya has been spurred to moderate moves on domestic debt accumulation to break the rising total public debt that has since grown to Sh8.7 trillion.

The Central Bank of Kenya, the state’s debt seller has been issuing an average of Sh50 billion in domestic bonds every month since January last year, largely to pay pending bills and to support infrastructure.

Speaking exclusively to the Star, the Institute for Social Accountability (TISA) executive director, Diana Gichengo said there is limited public attention on the government’s accumulation of domestic debt with limited accountability.

“The National Treasury is giving very generic information whenever it floats a domestic bond. Blanket statements like ‘use for infrastructure development’ or ‘budgetary support’ impends accountability,” Gichengo said.

She added that high-interest rates of up to 14 per cent are pilling more pressure on the country’s ballooning public debt hence not sustainable.

The organization has been at the forefront of advocating for debt transparency in the country under the Okoa Uchumi banner in the past five years.

The high domestic debt obligation amid dwindling revenue saw the National Treasury convert Sh87.8 billion worth of government securities that are due to mature in January into a medium-term infrastructure bond in order to avoid a cash crunch early in the New Year.

The direct conversion of maturing Treasury bills and bonds into longer-term security, which is known as a switch bond, has been done only once before by the exchequer, in June 2020.

The latest data from the National Treasury shows the state is expected to service Sh461.4 billion in redemptions and Sh553 billion interest on domestic debt in the current financial year.

The total stock of domestic debt currently stands at Sh4.4 trillion, Sh3.6 trillion in bonds while the balance is in Treasury Bills.

An Economist Jerry Ogutu wants borrowing laws to be updated to allow the Parliament to have a say in the floating of bonds and bills.